The Transitional Role of Institutional Trust in Online Interorganizational Relationships

Given the uncertainty of the online environment, institutional trust is fundamental in building and retaining online interorganizational relationships. The authors propose two types of institutional trust (a) third-party institution-based trust, which deals with intermediary driven structures, such as those in online B2B marketplaces, and (b) bilateral institutionalized trust, which deals with dyadic interorganizational processes, standards, and norms. We examine how institutional trust develops through their underlyding dimensions (i) structural assurances, (ii) facilitating conditions, and (iii) situational normality to engender trust and influence relationship continuity. This study focuses on the time-dependent nature of institutional trust from the exploratory to the maturity phase by describing (a) the role of bilateral relative to thirdparty institutional trust on buyer-supplier trust, and (b) the transition of the three underlying institutional dimensions on trust over the relationship’s life cycle. This research has implications for (1) the longitudinal role of institutional trust in online relationship building, (2) the design of trust-building mechanisms in online B2B marketplaces, (3) the safe and cost-effective building of online interorganizational relationships, and (4) the literature on initial trust formation.